Piracy is pointless when products are free. Giving away games has enabled China’s Tencent to brush off the threat of illegal downloads and become one of the biggest companies in the world. It will need to increase its overseas reach to keep the spot.
Smartphone game “Honor of Kings”, tipped as the world’s top earner, shows Tencent’s freemium model at work. The download is gratis but users are encouraged to purchase virtual items inside the game for real money.
For a tangible equivalent, non-gamers can think of the razor and blades model, where companies sell the razor cheaply but charge proportionately much more for the blades. Tencent does something similar. Games may be free, but downloadable content — DLC for those in the know — is pricey.